Save The Newspaper Industry and Still Lose Weight

This is a really interesting article on the newspaper business; how the eyeball model is failing and why a “subscription consortium” could be a positive development if Congress changes the antitrust laws that likely restrict newspapers from enabling this now.

Harder to foresee was the emergence of a painful paradox: Newspapers’ revenues have shrunk even as their audience has grown, because online-ad revenue does not come close to replacing print-ad revenue. Exactly why is not perfectly clear, but one reason is that only some newspaper advertising has moved to newspaper websites, with the rest shifting to such online upstarts as Google and Craigslist. Another reason is that readers seem to perceive print ads as information but Web ads as distractions, and so ad rates are much lower online than in print.

[From National Journal Magazine – How to Save Newspapers–and Why]

Before tackling the subscription concept, I do wish to take issue with Rauch’s suggestion that it is not “perfectly clear” why online advertising is failing to bridge the gap for newspapers with declining print distribution. While not “perfectly clear” it may fall into the rather obvious category that online advertising is more transparent than print and thus is less likely to benefit publishers through inefficiency. In other words, even CPM based display ads are performance based in that the advertiser pays for exactly what is delivered, not what is reported to be delivered.

Newspaper advertising is not monolithic either, there are classifieds, business card ads, information ads, sale ads, coupons, and spotlight ads. Of all these categories it is classifieds that have most certainly been negatively impacted by Craigslist et. al. For the other ad variants there is a good analog to online display ads but it’s not entirely clear that newspaper ad sales groups understand how to sell online ads, but having said that it is also true that coupons are far different from spotlight ads.

Perhaps the real problem that the newspaper business has is not a lack of options but a lack of imagination. Why is it that the best newspapers can do is interstitial and display ads?

There is one problem that newspapers face which is difficult to overcome and that is the fact that newspaper advertising is predominately local whereas online the boundaries presented by geography simply don’t apply. If I am placing ads for an automotive dealership and SFGate’s numbers present a picture that suggests only half of the online audience is within the 5 Bay Area counties that I care about then the consequence of that is that their ad rates are only worth half of the rate card to me.

This only serves to illustrate the weakness that display ads have online… if your .46% click through rate is now no better than .23, the 1:30 ratio of people who click on an ad to buy a car now causes a chain reaction that results in having to display the ad 12,000 times to get a lead across the finish line. What this means is that the CPM rate is worth about $8.30 to me if my competitive marketing costs are $100 per car buyer, and this is a success story! If my RPM (collective CPM to a page) is $25 on average, I have to generate 10 million pageviews just to generate $250k in revenue.

Rauch presents an interesting concept of a consortium subscription but here’s why it won’t work. News is fungible and with the explosion of news sources that are available online it is unlikely that newspapers as represented online today could justify a subscription cost on the basis of unique reporting alone. Even a meaningful consortium of newspapers would have a hard time sustaining this concept.

This is because newspapers by and large have taken a chainsaw to news gathering operations and as a result do very little in the way of unique local coverage. Cable news in particular has been aggressive about picking up alternative forms of local coverage and are ramping up initiatives to collect user submitted videos in particular, all of which further threatens the newspaper model of journalism.

Newspapers can, I believe, succeed online but they will need to broaden their reach and deepen the portfolio of advertising products they offer. As advertisers demand more precise targeting and yield the newspapers will have to respond with much better targeting and probably something like technographics that predict how different audience groups engage brands and online media.

As I have written before, I don’t think that newspaper executives are stupid or incapable of understanding what is happening to their collective industry. I do believe that smart people fall into a trap of viewing something different as simply an extension of what they have already been doing, and as such tend to be incremental in their innovations. Journalism is not broken, nor is the notion of print newspapers, but what is clear is that simply doing online what you were doing offline isn’t working and no amount of volume will make it up. If The Huffington Post can do as well as the rumor numbers have them doing, then the Washington Post can as well.

Lastly, the title of this post is something I played around with while thinking about television advertising for products that promise weight loss without any work. Eat all you want and shed the pounds! Of course they don’t work because losing weight is a simple equation about burning more calories than you are taking in (lot’s of factors, but in a nutshell this is it). The newspaper industry isn’t going to be able to save itself without some serious work to remake the culture of the newspaper business, deal with the costs of their unionized print operations, and optimize what is a generally expensive and low yield news operations. Nothing is free, same goes here.

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All the Time is Prime Time

Like every train wreck, you can see it coming but only at the point of impact does anyone really pay attention to it.

But the more significant shift can’t be blamed on the strike. In the past television season, there has been a sharp increase in time-shifting. Some of the six million are still watching, but on their own terms, thanks to TiVos and other digital video recorders, streaming video on the Internet, and cable video on demand offerings. So while overall usage of television is steady, the linear broadcasts favored by advertisers are in decline.

[From In the Age of TiVo and Web Video, What Is Prime Time? – New York Times]

It’s probably unfair to say television execs are a bunch of lemmings who have no one to blame but themselves. All of the major networks minus CBS have expanded into cable and an increasing number have integrated their online offerings, as opposed to treating them as side projects. In the final equation I think this is less about a new technology, or in the case of DVRs an old technology, altering audience behavior and more about consumer attention spans and competitive activities.

200805121201.jpgIt’s a fact that people watch less television today than they did even just a few years ago, and when combined with the explosion of content that is available and you have a perfect storm that results in substantially greater complexity in attracting an audience.

This complexity is also why television sitcoms have become much more targeted and are allowed a much shorter period of time to develop. The days of a Seinfeld or Cheers pulling down 15 or 20 share are gone and won’t be seen again.

Another dimension to all of this is that consumption of web-based video often happens at work, which may or may not have implications for content producers. I’d have to think that through a little before commenting. But one interesting side observation is the globalizing consequence of web-based video, which of course is not limited to a specific broadcast network and a geography.

30 percent of daily video consumption comes from Indians outside of India, largely from the Bay area and New York.

This international aspect represents a phenomenal opportunity for content networks to rethink the way they do advertising to appeal to new audiences online that they would never have the opportunity to reach through broadcast.
In the end the big television network will prosper as new channels for delivering content create new placement opportunities for advertising.

On the production side of the business it is clear that a decade of changes in the way that television shows are developed, financed, and syndicated has resulted in a broad array of content development capabilities across every genre, meaning there is no shortage of content to pump online.

Having a broad portfolio of content and a seemingly endless opportunity to distribute content doesn’t equate to content that audiences find appealing, so if there is one thing that could be targeted as white space at this point, it would certainly be instrumentation of the player endpoints and the content itself to register user engagement and subjective qualitative aspects.

Digital Hollywood

I spoke on a panel at the Digital Hollywood event yesterday, an event that has grown substantially from years past which no doubt reflects the growth of technology in entertainment. Here’s a flipbook version of the conference agenda… why not a plain ‘ol PDF?

Many of the panels were focused on online advertising, viral marketing, and monetization of content, all topics that capture the imagination of Silicon Valley, however I would offer the observation that the majority of companies were not from the Valley. In fact, most of these companies, some who were doing some really interesting things, I have never heard of. I would caveat that comment by saying I would not consider myself as having an encyclopedic knowledge of startups in these spaces, but having said that, you pick up a lot of chatter in the Valley echo chamber and these are not companies you hear about.

What is going on in the world of online media and advertising is massively disruptive. Big brands, and indeed small brands, are trying to figure out the viral marketing and social advertising game, and although the results have been mixed so far the fact remains that money will flow here to the detriment of print and broadcast mediums.

That may be somewhat stating the obvious but what is not often noted is the phenomenal range of companies that are being created to exploit the intersection of generational shift, online behavior, digital content, and brand management. Also not noted is that most of these companies are not in the Valley but in places like SoCal, Boulder, and New York.

Twitterfone, Simply Perfection

Twitterfone is a new service that let’s you send Twitter updates through speech recognition. You dial a number, record your tweet and hang up. It’s that simple.

My headline is a bold statement but allow me to explain why I believe that Twitterfone might in fact be a perfect application service:

  1. It works. I have no way of testing it against dialects, etc. but for my California english, it works flawlessly.
  2. Simplicity. You sign up, get a confirmation code via SMS, add your Twitter account details, and it’s ready to go. You call the number, record your tweet and hang up. It’s a 3 minute process.
  3. Amazingly viral. There are two aspects of the way this service is designed that make it incredibly viral. The first is really just the way Twitter is designed, the tweets include a status line indicating what client the user is using. The second is more important, for every Twitterfone tweet the service includes a tinyurl link back to the Twitterfone page that include an audio recording of your tweet. So basically, every tweet is an opportunity to acquire a new customer because of the high leverage factor (I am one Twitterfone user but 600 followers see my Twitterfone tweets and all get a link back to Twitterfone). Say I send 15 tweets a day using Twitterfone, multiplied by the number of followers I have and that is 8,700 impressions each day I am generating.
  4. It’s compact. The core service engine has to be robust but this is a solved problem (i.e. call centers). The user experience does not require significant feature buildout and aside from adding languages and dialects, there’s not a lot that they have to do.
  5. Monetization potential. Given the demographics and the mobile-centric nature of the service, along with the traffic growth they could generate in a very short period of time, this is a natural for advertising… a legitimate advertising model, not the “advertising because we couldn’t think of any other way to make money” kind.
  6. The WOW Moment. Every product and service has a moment in the first 60 seconds of use that an impression is formed which will shape all future interactions. This is the WOW Moment and it’s binary, you either have it or you don’t.

Amazon Kindle or Bezos’ Windmill?

Amazon is highlighting the fact that Kindles are available for immediate shipment following long delays following unprecedented early demand. That Amazon is devoting the choicest real estate on their site to the Kindle, as well as publishing their shareholder letter, underscore the commitment that Amazon is making to this device.

I’ve been watching the Kindle with a high degree of curiosity, fully aware that no electronic book reader has ever gone mass market despite some impressive technology achievements. It has not been lost on me that the reason why the Kindle is different is that Amazon is not a consumer electronics company, they are a retailer that has an enormous amount of clout in the content side of publishing and that is exactly what is required to drive success in electronic books.

It’s clear that Bezos sees a day when any and all content can be delivered to a Kindle and not only won’t Amazon have to store inventory, they also won’t have to ship anything but the Kindle itself to support their book business. In that light, the Kindle totally fits and is an impressive disruptive strategy to boot. Having said that, we have 550 years of mechanical printing to overcome and in terms of simplicity and cost, it’s hard to beat a hardcopy book.

I’m still skeptical that in the next 10 years we will be able to displace print but in many categories not only will this be success but it could be transformative as well. Can you imagine the capabilities that would be made available in classrooms if textbooks were available electronically for the Kindle and then integrated with social network capabilities? Take magazines and other periodicals as another example of a category that could be transformed with electronic delivery.

Still, even though I’ve had one on backorder for my wife, I think I’ll hold out for a little while.

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LED Lighting

I like home LED lighting but only for very specific applications, like counter lighting and for cabinets. The diffusion and color temperature of these lights is odd and they don’t get better as they warm up, like CFLs do. While this development is welcome, the chief business development guy just gave me an excuse to wait 2 years before jumping in. Referring to the high cost of the technology, which they currently offer for $40 for a single screw in bulb, Gibler said:

“They will be half the cost in another two years,” he said.

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Alert Thingy Killed Facebook

Just like Thwirl and Snitter totally changed the way I interact with Twitter and drove up my usage as a result, Alert Thingy is doing that for FriendFeed.

As Dennis says, who btw I ripped off the title for this post from, the result is that I am evolving in my behaviors with social networks at a fast cycle rate. The result is that I haven’t logged into Facebook in months and find little reason to resume.

With regard to comments escaping the blogosphere, I’m finding myself engaging in more discussion threads as FriendFeed comments attached to items, something I find both very convenient and very concerning.

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Information Wants to be Syndicated

Bloomberg doesn’t offer RSS feeds. While I’m not aware of the official story on this, when I was in NYC a few weeks ago I asked them about it and they basically said they don’t want people consuming their content on non-Bloomberg sites. Okay, I think that’s wrong but it’s their content so they can do whatever they want with it.

Interesting things happen to information when it becomes digital; your intentions as a publisher about how it should not be used often don’t work out like you planned. I really like Bloomberg news but I’m not going to hover over their site all day just to catch the latest updates, and apparently someone else didn’t like that approach…

It turns out that Google News does syndicate Bloomberg headlines with a link back to the source article. Using Twitterfeed, someone who shall remain nameless (and it wasn’t me, really) pumped the RSS feed for Google News through Yahoo Pipes to extract the Bloomberg headlines and then fed them into Twitter. The result is Bloombergbiz. Pure awesomeness.

This is my last twitter post of the day, I promise.

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The Office Telephone, 1875-2008

I have an office in Denver, told IT to not bother putting a phone in it… the number just forwards to my mobile phone so why not just use my mobile number all the time. The interesting thing I noticed is that the direct office line rarely got called anyway. I don’t think we are that far off from office phones being optional. Unified messaging still gets talked about a lot, but with kickass services like Grand Central being decoupled from any physical phone network, we can just take it with us wherever we go.

“YOU hardly ever hear the phone ring any more,” the publicity director at my publishing company said last summer. “I walk down the hall now, and it’s just so quiet.”

[From The Office Phone Call Was Music to the Ears – New York Times]

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I Have Seen The Future and It Works

Broadcasters should be very afraid.

I’ve watched the quality of streaming video increase substantially in recent years and with the advent of exciting new technologies like Silverlight it is not beyond speculation to suggest that with the barriers lowering for new entrants to create and distribute compelling online video content and user experience that we will see an explosion of offerings.

It almost ironic to think that the television industry once thought that 500 channel cable would be their salvation, enabling them to syndicate niche content and offer specialty channels that provided more inventory for advertising, but it’s the proliferation of broadband (often through cable) that may well be the undoing of television as we know it.

(post title courtesy of journalist Lincoln Steffens)

At the MIX conference this afternoon, Perkins Miller of NBC demoed the Silverlight powered video platform for NBCOlympics.com. Duncan Riley liveblogging for TechCrunch called it “kickass,” and it deservedly got the largest ovation of the day.

[From Move + Silverlight + NBC Olympics = “Kickass”]